For three hours yesterday, Pershing Square Capital Management founder William Ackman and his analysts tore apart Herbalife, arguing that the nutritional supplement and personal care seller is overstating how much it's selling.

"This is the best-managed pyramid scheme in the history of the world," Ackman told a Sohn Conference Foundation meeting in New York yesterday. The lengthy presentation was entitled, "Who Wants to Be a Millionaire?", and accused Herbalife of overstating sales.

"I don't think very many retail sales are actually happening at all," Ackman said. And when they do, they are happening at a lower price than Herbalife's suggested price, which Pershing Square analyst Shane Dinneen called an "artificial, inflated number."

The Cayman Islands-based company qualifies as a pyramid scheme because its independent distributors make more from recruiting others—they receive commissions if they do—than from selling Herbalife's products.

In addition to the devastating presentation—Herbalife shares have plunged by about a quarter since word of Ackman's short got out on Wednesday—Pershing Square has set up a Web site outlining its argument.

It is an argument that Herbalife itself disputes violently. The company said Ackman rejected its offer to participate in the conference.

"Now we know why," spokeswoman Barbara Henderson said. "Had our executives been there, they would have been able to tear Mr. Ackman's premises and interpretation of our business model apart. His misstatements and mistakes are too numerous to address immediately."

Ackman's presentation is the second time this year that Herbalife has found itself in an activist investor's crosshairs. Its shares plunged when Greenlight Capital's David Einhorn asked some pointed questions about the company during a conference call, and then soared when he failed to mention it at the Sohn conference in May. Pershing Square cited Einhorn's questions during their presentation, but made clear they had not consulted with him.